Officially, they are merely volunteers, members of the obscure-sounding Art Advisory Panel of the Commissioner of Internal Revenue. In reality, they are the taxman's art police, and anyone with art worth more than $50,000 may end up on their radar.
The IRS has been getting its share of bad press as of late. However, one positive is the Service seems to know what is in its wheelhouse – and what is not. The IRS knows taxes, but looks to outside experts when it comes to valuing art.
Do you have any valuable art in the family? If yes, then you need to be more than familiar with the Art Advisory Panel. Its opinion is potentially your burden. When it comes to taxation, no one likes surprises.
The Art Advisory Panel is, in the history of the tax code, a fairly new invention dating back to 1968.
Despite its relatively recent existence, the influence of the Art Advisory Panel has only increased over the intervening decades as the value of art itself has skyrocketed.
The Wall Street Journal recently provided an introduction to the Panel in an article titled “The Art (Tax) Police.”
Practically speaking, the value of art is ambiguous at best, and yet it is also very real. Just because you regard a painting as “priceless,” some potential purchaser just might give you, your estate, or your heirs a very definite and taxable price for it. The Art Advisory Panel exists to double-check your numbers on the real-world taxable value of the artwork for the purposes of the assessment of taxes or even charitable deductions. Consequently, the Panel truly is the tax police of the art world, scrutinizing any piece of art assigned a value of more than $50,000.
Happily, the Panel finds in favor of the taxpayer about half of the time. Unhappily, those taxpayers on the losing end find themselves stuck with a larger than anticipated tax bill and perhaps penalties.
When it comes to the valuation of art, it is worth your time to get a qualified appraisal so you are
well-prepared if the IRS calls in the art (tax) police.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: The Wall Street Journal (September 20, 2013) “The Art (Tax) Police”